29 Jul 2013
Flash: Volatility returns to global markets – RBS
FXstreet.com (New York) - Over the last couple of months there has been an ‘aroma’ of volatility returning to global markets, partly on the back of the US Federal Reserve tapering discussion, notes David Simmonds, Head of Currency Strategy.
Key quotes
However, “over recent weeks, volatility, notably including global currency volatility, has been generally soft. Behind the re-compression of vol generally has been the ‘fight back’ from monetary policy makers, led by the US Federal Reserve, against any tendency by markets to re-price the front end of interest rate markets.”
“Tapering is not tightening is the determined message – that helps put a bid under global bond markets, restores some calm to mortgage and corporate credit markets and allows equities more easily to climb all walls of worry around China growth, oil and Egypt, Portugal and government, Detroit insolvency and so on. Generally this all speaks to currency markets that are more becalmed and it probably speaks too to tougher headwinds against further global dollar advances.”
Finally, “Markets looking for an easy continuation of the Greenback’s very strong first half year gains may hence be challenged. US growth recovery remains sluggish and Q2 growth expectations have been revised consistently lower to somewhere well below 1% annualized growth pace.”
Key quotes
However, “over recent weeks, volatility, notably including global currency volatility, has been generally soft. Behind the re-compression of vol generally has been the ‘fight back’ from monetary policy makers, led by the US Federal Reserve, against any tendency by markets to re-price the front end of interest rate markets.”
“Tapering is not tightening is the determined message – that helps put a bid under global bond markets, restores some calm to mortgage and corporate credit markets and allows equities more easily to climb all walls of worry around China growth, oil and Egypt, Portugal and government, Detroit insolvency and so on. Generally this all speaks to currency markets that are more becalmed and it probably speaks too to tougher headwinds against further global dollar advances.”
Finally, “Markets looking for an easy continuation of the Greenback’s very strong first half year gains may hence be challenged. US growth recovery remains sluggish and Q2 growth expectations have been revised consistently lower to somewhere well below 1% annualized growth pace.”